In the summer of 2023 we embarked on a research project to give all asset manager signatories of the UK Stewardship Code the opportunity to share their thoughts, their challenges and their successes.  

We surveyed and interviewed representative from 43 firms, all of whom are actively involved in or leading their stewardship reporting, representing over £10.8 trillion AUM across Europe and the Americas (over a quarter of all AUM represented by the UK Stewardship Code signatories). 

Firstly, starting with the good. It was almost universally observed that the framework of the UK Stewardship Code submission has raised the standard of engagement, and the recording and reporting on engagement, across the industry.  

“It parameterises the kind of activities that are important to consider collectively as an industry. Without the code, you are kind of back to the wild west of reporting.” 

“It is a good structure to hold a mirror back to yourself as an organisation.” 

However, there were some participants in the research project who felt that they were being “shoehorned” into the FRC’s preferred structure, which was not fully aligned with their perfectly good, just different, approach.  

Many smaller or more specialised firms also expressed a desire for greater customisation and flexibility in the reporting structure, in order not to be penalised for not carrying out activities expected of global and larger asset managers, but not suitable for smaller players. 

“As a small investor in most of our positions, and due to general resource constraints, we don’t feel like it is our role or responsibility to have a lot of influence on policy and system risks – but we get penalised for this.” 

Sticking with comments on the structure of the UK Stewardship Code, many observed that whilst the quality of reporting was improving, it was not particularly investor friendly. Many firms felt that they were “writing for the FRC” in order to achieve signatory status, rather than for their clients, as is intended. Perhaps relatedly, most firms reported that they do not see a lot of client interest and engagement with the report beyond establishing their status as signatories. 

This lack of client/prospect engagement is particularly galling as the resource commitment and scale of the task is a universal challenge for firms of all sizes. For large firms with multiple asset classes to consider in a range of regions the effort to collate information is immense, while for small firms the relative resource requirement is a very significant proportion of available resource. In the current climate, and in light of the lack of investor engagement with the report, this resource consumption is becoming increasingly hard to swallow, especially when it is a case of prioritising alongside other key strategic projects.  

"It becomes the bane of my life and I don’t stop thinking about it for weeks on end" 

The lack of investor engagement with companies stewardship reports points to another widely reported challenge - reporting fatigue. Both from investors who are now faced with an overwhelming amount of information, and from the signatories, as the individuals responsible for collating the annual report are meeting increased resistance from internal teams who are frustrated with the constant cycle of requests throughout the year.  

“If you have your ESG team sourcing all this content, it takes away from the actual time to do the work that it’s asking us to do, [to the] detriment of the stewardship goals.”  

However, in spite of the challenges raised, all respondents are ‘certainly’ or ‘almost certainly’ going to continue submitting to the UK Stewardship Code over the next 5 years.  

“We absolutely would not bother doing this if our clients didn’t ask it of us” 

Finally, many queried if the Stewardship Code is fit for purpose in its current form and where it goes from here. While most respondents are committed to continue the report submission in the future, many call for an evolution of the Stewardship Code standards in order to reflect signatories structure and capabilities, and continue to raise the bar for best practices on effective stewardship and governance.  

“It is important that the hurdles continue to move to keep raising the standard, firms shouldn’t get complacent … it shouldn't be too easy!”  

It is clear from the conversations and feedback received that the future direction of the UK Stewardship Code is of great interest to existing signatories at both ends of the spectrum - those who feel left behind by overly onerous reporting requirements and those who want to see the bar continually raised. This a topic worthy of further discussion and an FRC consultation, including end investors and asset owners, in the not too distant future. 

The issue at the core of the question is about value alignment … investors and asset owners  need to be able to be confident that their choice of investment manager is aligned to their vales … when being a signatory to the UK Stewardship Code is all but universal, this is very hard”. 


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